MSMED Act May Extend Protection to Medium Enterprises

The central government is considering amendments to the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006, to include medium enterprises under its protective umbrella. This move aims to address long-standing demands from industry stakeholders for resolving payment disputes and boosting support for businesses beyond the existing scope of the Act.

Current Scope of the MSMED Act
The MSMED Act currently defines three categories of enterprises:
•    Micro Enterprises: Investments under ₹1 crore and revenue below ₹5 crore.
•    Small Enterprises: Investments up to ₹10 crore and revenue under ₹50 crore.
•    Medium Enterprises: Investments up to ₹50 crore and revenue under ₹250 crore (as per revised definitions from June 2020).
However, the Act’s protection for resolving payment disputes is currently limited to micro and small enterprises. Medium enterprises remain outside its purview, despite facing similar challenges.

Stakeholders’ Demands
Industry representatives, including the Federation of Indian MSME (FISME), have urged the government to include medium enterprises in the definition of "supplier" under the Act. This change would bring roughly 10,000–15,000 businesses into the ambit of the law, providing them access to Micro and Small Enterprises Facilitation Councils (MSEFCs). These councils resolve payment disputes through out-of-court settlement mechanisms.

Payment Disputes: A Critical Issue
Delayed payments from large businesses remain one of the most pressing problems for MSMEs. By extending legal protection to medium enterprises, the government aims to level the playing field, ensuring timely payments and financial stability for businesses across the sector.

Timeline and Impact
Discussions on the amendments are ongoing, with industry stakeholders expressing optimism about their potential benefits. However, experts, including Anil Bhardwaj, Secretary-General of FISME, caution that the drafting process may take another six months before any official notification is issued.
This initiative reflects the government’s broader efforts to strengthen India’s manufacturing and service sectors, empowering MSMEs to thrive in a competitive market.